Over-performed China Stock market (2011-02-11 SSEC analysis)

Yesterday was an interesting day. HSI dropped slightly less than 2%, while SSEC rose 1.59%. Many of us may wonder, will HSI tend to move towards SSEC, or SSEC will reverse direction and follow the trend of HSI?

Daily chart of SSEC:


The index has been sliding along the red wedge for over two months. Recently, it broke the upper red line. It shows that the bull power is quite strong.

On the other hand, I have identified a short-term pitchfork which is shown in purple. SSEC is currently testing the middle line of the fork. It acts as a resistant to the index.

If SSEC breaks the middle line of the fork, next resistance will be at next fibs-level, which is around 2855.

However, before understanding the weekly chart, do not be too confident on the breakout on daily chart.

Weekly chart of SSEC:


The long red line represents a long-term resistance to the index. Though there were a few false breakouts two months ago, it dropped back below the resistance then.

SSEC is currently testing the red line again.

Also, I have drawn two parallel up-trend lines (in green). SSEC broke down the triangle from above. This time, SSEC moves towards the end of the triangle. Would history repeat itself? Time will tell.

One more thing to add, volume has shrunk significantly. This is a bad signal for the index.

To conclude, there are pitchfork and down-trend line as resistances on daily and weekly chart respectively. Volume dropped greatly which tells us that investors lack confidence on stocks now. We could expect SSEC to drop, and will test the green up-trend line.